Taxation of the business car from 01/01/2026 - a practical view

What changes from 1 January 2026 in the area of VAT

From 1 January 2026, a special regime for selected vehicles is introduced, which distinguishes only two basic scenarios:

• 50% VAT deduction – when using the vehicle for business and private purposes

• 100% VAT deduction – for the exclusive use of the vehicle for business purposes

This regime applies to:

• passenger cars of category M1,
• selected two-wheeled motor vehicles of categories L1e and L3e.

The validity of the special regime is currently limited in time from 1.1.2026 to 30.6.2028.

When the 50% VAT deduction is applied

If the vehicle is also used for private purposes, the law allows  for a flat-rate 50% VAT deduction to be applied, without the need to monitor the actual ratio of journeys.

This flat rate applies:

• when buying a vehicle,
• in financial leasing,
• in the case of an operating lease or long-term lease,
• for all related expenses (fuel, service, repairs, tires, parking, car washing, etc.).

Advantage for practice:

With a 50% deduction, it is not necessary to keep a logbook for VAT purposes (so called “kniha jázd”), as the law automatically assumes combined use. However, this does not mean that it is not necessary to have any records of trips. In case of a tax audit, it is still the taxpayer's duty to be able to prove that the ratio of 50% of the mileage - or more - was for business purposes and that less than 50% of the total mileage was for private purposes. For this purpose, it is not necessary to have a detailed logbook as defined by law, but it is necessary to have a simplified record of business and private kilometres.

When can the 100% VAT deduction be claimed

If a VAT payer wants to claim a 100% VAT deduction, he must prove that the vehicle is used exclusively for business purposes.

From 1 January 2026, the Act introduces two key obligations:

a) Obligation to keep detailed records (logbook)

The VAT payer is obliged to keep detailed electronic records of the use of the vehicle

(b) Obligation to notify the tax authorities

At the same time, the taxpayer is obliged to notify the tax office that he claims a 100% VAT deduction from the vehicle. The notification is made within the deadline for filing the VAT return for the period in which the deduction was claimed for the first time.

Impacts of the new regime on income tax

The change in VAT also has a direct impact on income tax, especially in the case of a 50% deduction. Un-deducted VAT is not a tax expense. VAT for which there is no right to deduct under a special regime is not considered a tax expense from 1 January 2026.

This applies:

• when acquiring a vehicle,
• even with normal operating costs (fuel, service, repairs, etc.).

Difference Between Accounting and Tax Depreciation

In practice, a common situation arises:

• the accounting purchase price of the vehicle also includes the un-deducted VAT,
• the tax entry price of the vehicle is without this VAT.

The result is:

• higher accounting depreciation,
• lower tax depreciation,
• the difference that is adjusted in the income tax return.

Non-monetary income of an employee

If the employer provides the employee with a vehicle for private purposes, the employee incurs taxable non-monetary income under the Income Tax Act.

The employee's taxable income includes 0.5 % or 1 % of the entry price of the vehicle for each calendar month in which the vehicle was available for private use.

The new regime brings a simplification for the combined use of vehicles, but at the same time places higher demands on documentation with 100% VAT deduction and fundamentally changes the view of the tax deductibility of un-deducted VAT.

The obligation to adjust the deducted tax at the end of the year

For vehicles purchased before January 1, 2026, companies must adjust the deducted tax from the purchase at 100% to a new ratio of 50% of VAT. This adjustment is made at the end of each year during the preparation of VAT for the last period of the year. 

If you need help with the correct setup for your company, do not hesitate to contact us.